Denali Capital
is in
the market again this year, ramping up its second collateralized
loan obligation including middle market credits. Market players
said the fund is planning to pull off a summer execution of a $400
million deal for which it has been warehousing assets since March.
The deal is supposed to include a sizeable basket of middle market
loans, but an exact amount could not be determined. Officials at
the fund declined to comment.

The liabilities to support the deal are expected
to hit the market mid-summer and if current funding levels remain
the same, pricing on the triple-A liabilities backing the deal are
supposed to come in at LIBOR plus 44 or 45 basis points, according
to dealers. In an unusual twist, the manager used middle market
credits to fill out a portion of the collateral base of the deal it
marketed last October, completing the ramp up in early March (LMW,
10/28).

Another manager noted that using middle market
credits is risky in the sense that liquidity for the names is
limited, but he explained there is opportunity in the middle market
because credits are not as broadly syndicated and therefore getting
allocations can be somewhat less difficult. In addition, some argue
that pricing can be a little richer on deals. Market players expect
the deal to close by the end of this summer.